FAQ - State Tax
A. The current state tax rate is 3%.
A. Every surplus line broker must make an annual state tax filing. The amount of state tax is 3% of the California taxable nonadmitted premium transacted by the broker for California home state insureds from January to December 31 of the previous year. This form must be completed by all brokers whether or not business was transacted. For additional information regarding the filing of state tax returns, contact the California Department of Insurance Premium Tax Audit Bureau at (213) 346-6097
A. They are on the SLA home page, Tax Forms: http://www.insurance.ca.gov/0250-insurers/0300-insurers/0100-applications/tax-forms-instruct-and-info/index.cfm
A. The 2012 Surplus Line Broker and Special Lines Surplus Line Broker Annual Statement and Tax Return has a number of changes from the 2010 form, as follows. Please refer to Surplus Line Broker and Special Lines Surplus Line Broker Tax Return Instructions for complete details. Premiums must be reported as follows:
A. Line 15 is for Calendar Year 2012 - even if the premium reported is nontaxable - and is for informational purposes only. The amounts reported may not necessarily reconcile with the other lines. However, the reasons for the differences should be noted on the return.
A. The Annual Statement and Tax Return and payment must be sent to the California Department of Insurance, postmarked on or before March 1 following the end of the calendar year. When the due date falls on a Saturday, Sunday or State or Federal legal holiday, the statement, tax return and payment are considered timely if postmarked on the next business day. Please refer to the California Insurance Code Section 1775-1775.9.
A. The due date for surplus line taxes is to be calculated from the surplus line broker's "invoice date" rather than policy effective date. The invoice may not be more than 60 days following the policy effective date. Note that the effective date of the policy is used for purposes of determining the basis for the tax (whether to apply the prior law that taxed only the California portion of the premium or the law effective 7/21/11 which taxes the entire premium for California home state placements). . Refer to California Insurance Code Section 1774(d)(3).
A. Brokers whose annual tax is $20,000 or more are required to participate in the electronic funds transfer program. To register as an EFT taxpayer, contact the DOI's EFT Unit at (916) 492-3288.
A. If a broker fails to pay state tax by the due date, it will result in a penalty of 10% of the amount of payment due plus an interest rate of 1% per calendar month or fraction thereof, until the payment is received by the Commissioner. More severe penalties may be imposed for "willful" violations.
A. Every surplus line broker whose annual tax for the preceding calendar year was $5,000 or more shall make monthly installment payments. Refer to CIC Section 1775.5 through 1776.
Q. Is it necessary for a California consumer to pay the 3% tax when coverage is placed with a nonadmitted insurer on their own for their own property, without the assistance of an agent/broker?
A. California does require a direct placement tax from the consumer for coverage placed on their own for their own property with a nonadmitted insurer. Refer to Bulletins #621, #622 and #623.